Context:
The Securities and Exchange Board of India (SEBI) has revised the mutual fund (MF) distribution incentive structure to boost financial inclusion in smaller cities and among women investors. The regulator has also capped the maximum exit load on MF schemes at 3 per cent.
Key Highlights:
Reintroduction of B-30 Incentives
- What? SEBI will provide incentives to distributors for bringing new individual investors (new PAN) from beyond top-30 (B-30) cities.
- Structure:
- Lumpsum investment: Incentive = 1% of the first application amount.
- SIP investment: Incentive = 1% of total investment in the first year.
- Cap: Maximum ₹2,000 per new investor.
- Purpose: Encourage mutual fund penetration in Tier-2, Tier-3, and smaller towns.
Incentives for Women Investors
- Gender Inclusion: Distributors will earn an additional commission for bringing new women investors (new PAN).
- Calculation: Same as B-30 incentive structure (up to ₹2,000 cap).
- Objective: Promote women’s participation in the mutual fund industry.
Background
- Suspension in 2023: B-30 incentives were suspended after SEBI found misuse — transaction splitting and portfolio churning to claim higher incentives.
- Revamped Framework: Now system-driven checks and tighter controls to prevent irregularities.
Reduction in Exit Load
- Earlier: MF schemes could charge up to 5% exit load (though most charged 1–2%).
- Now: Maximum cap reduced to 3%, aligning with industry practice.
- Rationale: Balances investor protection with scheme flexibility, especially for funds investing in less liquid securities.
